A formal [4 + 1] cycloaddition of 1,3-dienyl beta-keto esters has been developed. This two step process involves Pd(II)-catalyzed intramolecular cyclopropanation to produce vinylcyclopropanes and a subsequent mild vinylcyclopropane-cyclopentene rearrangement promoted by MgI2. The cyclopropanation method notably requires the use Of Mg(ClO4)(2), presumably to facilitate keto-enol tautomerization, and is greatly improved by the use of copper(II) isobutyrate as co-oxidant. A range of substrates with various substitution patterns is demonstrated.